Macro pressures are still brimming, and investors who do not actively review and rebalance their portfolios could be caught off guard.

This year has not been kind to equity investors. A combination of elevated crude oil prices, a weakening rupee, geopolitical uncertainty stemming from the Middle East conflict, and sustained FII selling has kept Indian markets choppy through the better part of 2026. While April delivered a relief rally with the Sensex and Nifty rising over 7%, experts caution that the underlying macro pressures have not gone away, and that investors who do not actively review and rebalance their portfolios could be caught off guard.

The macro backdrop

The scale of the oil shock is beginning to show up in growth forecasts. UBS has cut its FY27 India GDP growth forecast to 6.2% from 6.7%, while Standard Chartered has revised its estimate down from 7.1% to 6.4%, both citing the drag from elevated energy costs. Crude oil, which averaged around $70 per barrel last year, has averaged over $114 per barrel in April, a level that feeds directly into inflation, the current account deficit, and corporate margins across oil-sensitive sectors.
Four macro forces are converging simultaneously and each has direct implications for how investors should position themselves: the US Fed’s policy stance, inflation driven by rising crude oil prices, the Indian rupee’s depreciation against the dollar, and sustained FII outflows from domestic equities.
The majority of experts believe that if this situation persists, the Indian stock market may remain volatile and deliver modest returns in FY27. That is not a reason to exit, but it is a reason to be deliberate.

Focus on quality, not momentum

The unanimous advice from fund managers and research heads is to resist the temptation to go aggressive on equities at this stage. Vinit Bolinjkar, Head of Research at Ventura, recommends a tilt toward “select quality large-cap, high-free-cash-flow names with limited direct commodity exposure, while maintaining strict position sizing and adequate cash buffers.”
He adds: “Incorporating regular profit-booking, staggered SIP-like entries in volatile phases, and some hedging via duration-adjusted bond allocations or sectoral diversification outside the oil-sensitive universe can help preserve capital when the market swings.”
Experts broadly advise staying invested but cautious, rebalancing smartly, and keeping some cash ready. The view among most is that May could be volatile but not necessarily bearish, with select opportunities available in specific sectors.

Mutual funds vs direct equities

Abhishek Jain, Head of Research at Arihant Capital Markets, draws a clear line between investors who can track markets daily and those who cannot: “For investors who are unable to monitor stocks on a daily basis, mutual funds remain a better and more disciplined investment option, as they provide professional management and diversification. Investors with a long-term horizon of 3 to 5 years should continue investing systematically rather than reacting to short-term market movements.”
Jain adds that allocations between equities, mutual funds, and ETFs should be driven by the investor’s financial goals and risk profile, not by short-term market sentiment.
Large-cap funds provide stability, flexi-cap funds offer growth flexibility, and index funds deliver low-cost diversification for long-term wealth creation. Hybrid funds are ideal for investors seeking balanced, single-solution portfolios with automatic rebalancing. For most retail investors navigating the current volatility, a combination of these is likely more robust than a concentrated direct equity portfolio.

Sectors to Focus On, and Where To Trim

Tushar Badjate, Director at Badjate Stock & Shares, says the current environment is actually an opportunity for investors willing to take a measured approach: “This is the perfect time to gradually invest in fundamentally strong sectors and quality businesses available at better valuations.” He points to strong balance sheet companies, businesses with pricing power, domestic consumption themes, manufacturing and infrastructure, select financials, and long-term SIP discipline in mutual funds as the framework to follow.
CFA Anchal Kansal, Senior Advisory Manager at Green Portfolio PMS, brings a more specific lens to equity portfolio construction. Her view: follow government spending, not just sentiment. “Defence, infrastructure, railways, and PLI-linked manufacturing have policy tailwinds backed by actual budget allocations. Metals and defence have had a strong run; if they’re overweight in your portfolio, consider trimming.”
The broader expert consensus is to trim small and mid-cap exposure, book partial profits where positions have run significantly, and keep cash ready. Adding gold and dollar-linked assets as hedges is also advisable given the rupee’s vulnerability.

Keep your SIPs going

One point every expert agrees on is that stopping SIPs during a volatile period is the wrong move. Kansal puts it plainly: “Volatility is exactly when rupee-cost averaging works.” The logic is straightforward — pausing SIPs when markets are down means missing the very accumulation window that makes systematic investing effective over the long run.
Equity investments held for 7 to 10 years have shown positive returns in over 95% of rolling return periods historically. This long-term approach smooths out short-term volatility while capturing equity’s wealth-creation potential. Exiting or pausing during a correction compresses that time window and often leads to investors re-entering at higher prices, undermining the compounding effect entirely.
For mutual fund investors specifically, Kansal advises reviewing the category mix rather than stopping contributions. Mid and small-caps have had a strong multi-year run and may warrant rebalancing toward large-caps or flexi-cap funds. Adding a balanced advantage fund, which dynamically adjusts equity and debt allocations based on market valuations, can provide a useful cushion if sentiment deteriorates further.

The larger picture

Harsha Vardhana VM, Founder and Group CEO at Atom Privé Wealth, offers perhaps the most grounded summary of the moment: “India’s fundamentals stay strong, but caution is needed.” The advice is to stay overweight Indian equities but use volatility to add selectively, rather than making wholesale portfolio changes based on near-term noise.
Kansal’s parting observation is worth keeping in mind as earnings season unfolds: “The market rewards those who read between the lines, not just what companies report, but what they don’t say. Vigilance, not just diversification, is the real edge right now.”